"Monthly Dose" Employment Law: October 2023

1. (No) Personal liability of the managing director of a GmbH towards employees of the GmbH for the payment of the statutory minimum wage (BAG judgement dated 30.03.2023, 8 AZR 120/22)

In its judgement of 30 March 2023 (8 AZR 120/22), the German Federal Labour Court (Bundesarbeitsgericht, BAG) decided that the managing director of a GmbH is not liable to the GmbH's employees for the payment of the statutory minimum wage under the German Minimum Wage Act (Mindestlohngesetz, MiLoG).

In the facts underlying the decision, the employee received from the GmbH from the employment that had existed since 1996, in the calendar year 2017 a monthly gross remuneration of EUR 1,780 (based on a regular working time of 40 hours per week). After the employer had fallen behind with the payment of a monthly remuneration at the beginning of 2017, the plaintiff asserted a right of retention with regard to his work performance for the month of June 2017.
Normally, he would have performed his work on 22 working days in June 2017 and thus worked 176 working hours. After the employer did not grant the remuneration for the month of June 2017 following an out-of-court demand for payment by the plaintiff and subsequently went bankrupt, the plaintiff brought an action for damages against the defendant managing directors of the GmbH, which he based on the legal basis of Section 823 (2) BGB in conjunction with Sections 21(2) no. 9, 20 MiLoG, and the amount of which he claimed to be EUR 1,555.84 (= 176 x EUR 8.84 (as the relevant hourly minimum wage in June 2017).

The plaintiff argued that the statutory provision of Section 20 MiLoG, according to which a company is obliged to pay the minimum wage, would include a protective law within the meaning of Section 823 (2) of the German Civil Code (Bürgerliches Gesetzbuch, BGB) in favour of the affected employees. Since the managing directors of a GmbH can also be held personally liable for the payment of a fine in the event of a negligent or intentional breach of the obligation to pay the minimum wage in accordance with Section 21 (1) no. 9 MiLoG, the defendants in the present case would also have to be personally liable to the employees for unpaid minimum wage.

The BAG, like the two lower instances courts, dismissed the action and rejected the personal liability of the managing directors. The provisions of the MiLoG, which may also result in a fine for the managing directors in the event of a violation (Section 21 (1) no. 9 in conjunction with Section 20 MiLoG) are not provisions intended to protect employees in relation to the managing directors. Therefore, employees could not assert a direct claim for damages (section 823 (2) BGB) against the managing directors for unpaid minimum wages under the MiLoG. The BAG justifies this result as follows:

In principle, only the company's assets are liable for the company's debts (Section 13 (2) of the German Act on limited companies (GmbHG)). The liability of the managing directors - in view of the liability according to Section 43 (2) GmbHG - is in principle limited to the relationship to the company. A liability of the managing directors towards creditors, also towards employees of the company, therefore does not exist as a rule. Admittedly, the duty to manage the company properly, which is incumbent on the managing directors under Section 43 (1) GmbHG by virtue of their position as a corporate body, also includes the duty to ensure that the company behaves lawfully and complies with its legal obligations (so-called duty of legality). However, this duty also exists in principle only vis-à-vis the company and not also in relation to the company's employees.

A managing director of a GmbH is only personally liable to third party creditors for the company's debts if there is a special ground for liability. This could arise in the context of liability for damages under Section 823 (2) BGB if the mandatory law relevant to the specific facts of the case provided third-party protection in favour of the employees. Such third-party protection could not be inferred from the statutory provisions of the MiLoG on the obligation of the GmbH employer to pay the minimum wage (Section 20 MiLoG) and on the personal liability of the GmbH managing directors in the context of the offence of non-payment of the minimum wage pursuant to Sections 20, 21 (1) no 9 MiLoG. Otherwise, even in the case of slight negligence, the employees would have claims for damages in the amount of the statutory minimum wage not only against the company but also against the managing directors. This would contradict the liability system of the GmbH laid down by law as well as the fundamental position of the company as the debtor of the employees' remuneration claims.

Implications for practice: 2 core guiding principles and 2 further sensitisations for practice

The BAG's judgement is in line with its case law on the personal liability of the GmbH managing director vis-à-vis the employees arising from employer-related obligations of the GmbH from the employment relationship, which is to be denied in principle. In the past, the BAG had, for example, denied the liability of the GmbH managing director for a failure to provide insolvency protection for credit balances from part-time work for older employees (Section 8a ATG) in the event of the subsequent insolvency of the employer (judgement of 23 February 2010, 9 AZR 44/09).

At the same time, the judgement sensitises GmbH’s managing directors - once again - to the liability risk related to fines in the event of non-compliance with the requirements of the MiLoG for the remuneration of employees. In this context, the BAG provides two further impulses for practice: (1) It hints at the fact that, according to its assessment, the offence of imposing a fine under Section 21 (1) no. 9 MiLoG requires the employer to be solvent and that this is therefore not the case if the employer is insolvent. (2) It leaves open whether the offence of imposing a fine under section 21 (1) no. 9 MiLoG also covers the non-payment of remuneration in the amount of the minimum wage for periods without work performance. In practice, this is denied by the predominant correct opinion in the literature. 

2. Data protection does not justify protection of deeds or continued possible use of the fruit of the poison tree - no evidence-related prohibition of use of findings from open video surveillance that does not comply with the GDPR in a dismissal lawsuit (BAG judgement dated 29.06.2023, 2 AZR 296/22)

In its judgement of 29 June 2023 (2 AZR 296/22), the BAG once again had the opportunity to decide on the permissible utilisation of the employer's findings from (surveillance) actions that do not comply with data protection law in a dismissal dispute. In addition, the BAG was able to establish the legal principle in the judgement that the parties to a works agreement cannot stipulate a restriction on the use of data from the employer's surveillance activities in a labour court dispute.

The subject matter of the dispute concerning the termination of employment was a case of working time fraud of which the plaintiff employee was accused by the defendant employer. Specifically, the defendant accused the plaintiff of not having worked an overtime shift on 2 June 2018 with the intention of nevertheless being paid for it. To this end, the plaintiff had first entered the factory premises on that day. However, the evaluation of the recordings made by the video camera at gate 5 to the factory premises, which was marked by a pictogram and which could not be overlooked in any other way, following an anonymous tip-off, showed, according to the defendant, that the plaintiff had left the premises again before the start of the shift. Thereupon, the defendant terminated the employment extraordinarily, alternatively ordinarily.

The plaintiff filed a complaint against the dismissal and claimed that he had worked on the day in question. The findings from the video surveillance were subject to a ban on the use of facts and evidence and could not be taken into account in the dismissal dispute. The video surveillance violated the mandatory data protection provisions of the DSGVO and the BDSG. In addition, the recordings had been stored for too long. Signs had only indicated a storage period of 96 hours, which had been exceeded in this case. Furthermore, at the time of the facts in dispute, a works agreement was in force according to which video recordings may not be used to evaluate personal data. The two courts of first instance followed this argument on the prohibition of the use of evidence and upheld the action for dismissal.

The BAG, however, allowed the appeal filed by the defendant against the second-instance judgement, overturned the judgement and referred the case back to the Higher Labour Court for a new decision. In its reasoning, the BAG stated that the employer could rely on recordings from an open video surveillance to prove an alleged breach of duty by the employee in a dismissal dispute, even if the video surveillance may not have complied with all data protection requirements. A prohibition of exploitation could be considered if this was mandatory due to a legal position of a litigant protected by the Basic Law. Only if a surveillance measure entailed a serious violation of fundamental rights could a prohibition of exploitation be considered in exceptional cases. In the case of open video surveillance and if - as in the case at hand - the employee's conduct was intentionally in breach of the contract, this was not the case, as the employee was not protected against spying due to the recognisability of the surveillance, but only with regard to documentation, dissemination and self-development. The protection of the employee's interests had to take a back seat to the employer's interest, which was also worthy of protection, in using the video recordings as evidence in the proceedings for protection against dismissal. In view of this weighing, it was also fundamentally irrelevant how long the employee waited before viewing the video recordings for the first time and how long they were stored. Whether the video recording complied in every respect with the provisions of the GDPR or the BDSG was irrelevant to the question of usability. With these legal sentences, the BAG follows its previous case law on the usability of facts obtained in a non-data protection-compliant manner regarding a concrete intentional breach of relevant duties arising from the employment relationship by the employee in a dismissal case (see e.g. judgement of 23 August 2018, 2 AZR 133/18).

The BAG was also able to establish the legal principle relevant to the decision that employer and works council could not independently establish a procedural ban on the use of evidence in a works agreement - for example, by stipulating that data obtained from surveillance activities may not be used for the evaluation of relevant personal data without exception. The parties to the works agreement did not have the power to regulate such a complex of legal proceedings, as the formulation of such proceedings was exclusively subject to the legislator.

Consequences for the practice

If the employer refers to video material that may not be lawfully obtained in all respects in unfair dismissal proceedings, the courts must weigh up the interests involved. In this respect, on the one hand, the significance of the data protection regulations that have been violated and, on the other hand, the significance of the breach of duty of which the employee is accused are in conflict. In doing so, the BAG adheres to its previously held pro-utilisation view: Data protection does not justify protection of actions. Violations of data protection law only lead to a prohibition of exploitation if the surveillance measure leads to a serious violation of fundamental rights. This will be negated above all in the case of blatant surveillance. Companies should therefore always act transparently in video surveillance and other control measures. Also helpful for practice is the BAG's finding that a prohibition of the use of evidence of data obtained inadmissibly under data protection law cannot result from a works agreement, as the parties to the works agreement lack the competence under works constitution law to formulate this subject matter. Against this background, the provisions in a works agreement on video surveillance, which are still often found in practice, that the employer will not evaluate personal data from the surveillance results, are practically empty, at least with regard to the evaluation of relevant data in disputes on termination rights. This has to be taken into account by the parties to the works agreement in the handling of such works agreements and by the employer in the communication towards the employees.

3. Staff secondment in the public sector not incompatible with the EU Temporary Agency Work Directive (ECJ judgment of 22.06.2023, C-427/21).

In its judgment of 22 June 2023 (C-427/21), the ECJ had the opportunity to assess the applicability of Directive 2008/14/EC (EU Temporary Agency Work Directive) to the provision of personnel secondment in the public service (Personalgestellung) in accordance with section 4(3) of the Collective Agreement for the Public Service (Tarifvertrag des öffentlichen Dienstes, TVöD).

A personnel secondment pursuant to Section 4 (3) TVöD exists if the tasks previously performed by the employee are outsourced to a third party and the employer instructs the employee to perform the work owed under the employment contract with the third party within the framework of the continuing employment relationship. In fact, this constellation resembles an employee leasing in that the employee performs his work for the third party on the basis of the third party's professional right to issue instructions, and for which the EU Temporary Agency Work Directive has stipulated substantive restrictions, inter alia, with regard to the generally only temporary performance of the employee leasing (only of temporary duration), which the German legislator has implemented in principle in the Temporary Employment Act (Arbeitnehmerüberlassungsgesetz, AÜG). At the same time, the German legislator determined in Section 1 (3) no. 2b AÜG that the AÜG does not apply to the provision of personnel in accordance with Section 4 (3) TvÖD. The EU Temporary Agency Work Directive does not provide for such an exception to its scope of application. So far, case law has not had the opportunity to rule on the compatibility of the exclusion of the provision of personnel from the scope of application of the AÜG with the EU Temporary Agency Work Directive. In practice, this has so far been affirmed predominantly on the basis of the arguments recently announced by the ECJ, which are set out in detail below. However, in view of the lack of clarification in case law, a legal residual risk remained, which the ECJ closed with its ruling of 22 June 2023.

The ruling was based on a request for a preliminary ruling by the BAG of 16 June 2021 (6 AZR 390/20), which had the following facts as the subject matter of the dispute: The defendant employer, which had the legal form of a GmbH, whose sole – public – shareholder is the county district of Göppingen (Landkreis Göttingen) and which operated a clinic in Göppingen, spun off the areas of post office, archive and library to a subsidiary which was also newly founded in the legal form of a GmbH. The spin-off included a transfer of business in accordance with Section 613a BGB. The employment of the employees affected by the spin-off were subject to the TvÖD. Some of the affected employees, including the plaintiff, objected to the transfer of their employment to the subsidiary pursuant to Section 613a (6) BGB. The defendant instructed the objecting employees to subsequently perform their work for the subsidiary by way of personnel secondment in accordance with Section 4 (3) TvöD. The plaintiff refused to perform his work for the subsidiary and sought a declaration in his action that he was not obliged to perform this work for the subsidiary on the basis of the defendant's instructions. In support of his claim, he argued that the work for the subsidiary did not meet the requirements of a legally effective supply of temporary workers and that the provision of personnel in accordance with Section 4 (3= TVöD and the exemption provision of Section 1 (3) no. 2b AÜG, which referred to it, was not compatible with the EU Temporary Agency Work Directive. Such a permanent personnel secondment was specifically not compatible with the EU Temporary Agency Work Directive, which solely stipulates that temporary agency work is permissible.

The courts of lower instance dismissed the action against the personnel secondment. The BAG referred the question to the ECJ for a decision as to whether a personnel secondment pursuant to Section 4 (3) TvöD falls within the scope of the EU Temporary Agency Work Directive. The ECJ denied this in its judgement: The scope of application of the EU Temporary Agency Work Directive is, in principle, (only) geared to employment relationships in which the employer must have the intention, both at the time of the conclusion of the employment contract and at the time of every temporary assignment actually made, to place the worker in question temporarily at the disposal of a user undertaking. However, this was not the case in the facts relevant to the decision. The employee had originally been hired to perform the services for the employer. At the time of the commencement of the personnel secondment, the employment contract had only continued to exist because the employee had exercised his right of objection with regard to the transfer of the employment relationship to the subsidiary according to Section 613a (6) BGB.

The personnel secondment pursuant to Section 4 (3) TvÖD is also not covered by the purpose of the EU Temporary Agency Work Directive, which in essence - inter alia with a view to limiting the permissibility of the provision of temporary workers to those of a merely temporary nature - is geared to the flexibility of companies to create new jobs and to provide the temporary workers provided with access to an employment relationship with the hirer as far as possible after the expiry of the legally permissible maximum period of provision. This purpose is not relevant for a permanent employment relationship, which generally forms the basis of the provision of personnel pursuant to Section 4 (3) TvÖD.

Moreover, an employee who can object to the transfer of his employment relationship would retain all the working conditions with his previous employer. Thus, in this situation, there is no need for special protection arising from the EU-Temporary Agency Workers Directive for temporary agency workers.

Consequences for the practice

The ECJ's ruling has been welcomed with relief by the personnel secondment practice. Employers who apply the TVöD to the employment relationships of their employees can continue to carry out staff secondments after outsourcing in accordance with Section 4 (3) TVöD without having to observe the provisions of the AÜG. With regard to the statutory exceptions of Section 1 (3) AÜG, the compatibility of the legal exclusion of the practically very relevant case groups of intra-group leasing of workers (Section 1 (3) no. 2 AÜG) and of only occasional leasing of workers in accordance with Section 1 (3) no. 2a AÜG with the EU Temporary Agency Work Directive, which also does not provide for these exceptions, remains unclear. Even if for these two groups of cases, in view of the purpose of the EU Temporary Agency Work Directive, which is not directly relevant here either, there are - unchanged - weighty arguments for the exclusion from the scope of application of the AÜG, the final legal certainty remains reserved for occasional judicial clarification.

4. Titling of a (continued) employment claim does not in principle restrict the employer's right to issue instructions (LAG Hamm decision of 15.05,2023, 18 Sa 1195/22).

In its decision of 15 May 2023 (18 Sa 1195/22), the Higher Labour Court (LAG) Hamm continued the case law of the BAG with regard to the objection of the impossibility of tenorised continued employment.

In the underlying case, the first-instance labour court had upheld the plaintiff's action for protection against dismissal and ordered the defendant employer to provisionally continue to employ the plaintiff as a senior physician in the psychiatric outpatient clinic until the legal conclusion of the dismissal dispute.

The defendant offered the plaintiff to work as a doctor in a psychiatric day clinic four kilometres away from his place of work in order to fulfil his procedural claim to continued employment. As a basis for this instruction, the defendant stated in particular that the workload in the corresponding day clinic could no longer be managed by the licensed staff (among other things due to staff shortages), that there was therefore a need for employment here, and that a transfer reservation had been agreed with the plaintiff in the employment contract. The plaintiff rejected this activity, referring to the procedural claim for continued employment that had been adjudicated in the first instance, and subsequently initiated compulsory enforcement by the labour court of the first instance judgement. In the appeal instance, the defendant requested the provisional suspension of the enforcement of the first-instance continued employment title and argued in support of the application that the plaintiff's claim to (continued) employment was precluded by the subsequently arising objection of fulfilment. In reply, the plaintiff argued that the task assigned to him by directive in the day clinic did not correspond to the originally titled claim for continued employment and that the defendant thus exceeded the limit of equitable discretion, i.e. its powers. Rather, the transfer included a "punitive transfer" and the staff representatives had not agreed to it.

The LAG Hamm allowed the appeal and thus the defendant's objection to fulfilment. In its reasoning, it stated that the employee's claim for (continued) employment was not concretised by the titling alone in such a way that the employer could only fulfil it by assigning a content described in the operative part of the judgement, but rather the employer could also exercise its right to issue instructions for the concretisation of the work performance according to the general standards of labour law within the framework of the employment in process on the basis of a procedural claim for continued employment. This applied in any case if the continued employment was tenor "under unchanged working conditions" and the judgement referred to the employment contract which permitted the assignment of another activity and resulted from the principles of interpretation for enforcement orders and judgements announced by the BAG in its case law (for example in its decision of 05 February 2020, 10 AZB 31/10). Even if other documents cannot in principle be admissibly used in the interpretation of enforcement orders, the facts of the case and the reasons for the judgement can be used as the title of a judgement and the documents used in the body of the judgement (specifically, in this case, the employment contract with regard to the content of the document) can be taken into account: Employment contract with regard to the content of the work performance related to the procedural continued employment) could be used as part of the enforceable title for the interpretation.

This also applies without recourse to a transfer clause in the employment contract, provided that the employer remains within his right of direction and instruction according to Section 106 of the German Trade, Commerce and Industry Code (Gewerbeordnung, GewO). In this respect, the court merely had to check the evidence. The objection to fulfilment (with regard to the titled claim for continued employment) only did not apply if the employer obviously exceeded the limits of the right to issue instructions.

Consequences for the practice

This decision, which is helpful for litigation practice, is in line with the previous case law of the BAG (in addition to the aforementioned decision, inter alia, in its decision of 21 March 2018, 10 AZB 560/16), according to which the right of direction is not restricted by a continued employment title to the job named therein, so that the employer is enabled to fulfil the continued employment claim by assigning another job that is in line with the contract. Employers can therefore continue to ward off a compulsory enforcement initiated by the employee from a titled claim for continued employment by assigning another job if the specifically assigned job is covered by the employer's right to issue instructions.

5. Works council's right of initiative for co-determination in the design of a time recording system (LAG München judgement dated 22.05.2023, 4 TaBV 24/23).

In its judgement of 22 May 2023 (4 TaBV 24/23), the LAG Munich had the opportunity to deal with the works council's right of initiative for co-determination in the introduction of a time recording system in accordance with Section 87 (1) no. 7 of the Works Council Constitution Act (BetrVG) under the influence of the judgement of the BAG of 13 September 2022 (1 ABR 22/21) on the mandatory recording of working time in accordance with Section 3, (2) no. 1 of the Labour Protection Act (Arbeitsschutzgesetz, ArbSchG). In its judgement of 13 September 2022, the BAG had rejected such a right of initiative with regard to the introduction of a time recording system and only allowed co-determination with regard to the "how" of time recording - the selection of the technology and its use.

In the case at hand, the works council elected for the local company had requested the employer to negotiate on the concrete design of time recording for field workers. Specifications for time recording existed exclusively for office staff, which were regulated in group company agreements on working time and its recording in an SAP system. The employer rejected co-determination with reference to the fact that the local works council was not competent and that the decision had already been made in principle in favour of a system for the electronic recording of working time exclusively for the office staff, and therefore refused to enter into the negotiations requested by the works council for the conclusion of a corresponding company agreement. In addition, the employer objected - with reference to the decision of BAG of 13 September 2002 - that with regard to an expected statutory regulation on time recording and a planned opening of the collective agreement in this regard, it should currently wait, since it had not yet been decided whether field staff would be subject to the recording obligation determined by the BAG.

At the request of the works council, the Labour Court Munich appointed a reconciliation board (Einigungnsstelle). The employer's appeal against the decision of the first court was unsuccessful before the Higher Labour Court Munich (LAG Munich). The LAG Munich justified its decision by referring to the legal wording of Section 87 (1) no. 7 BetrVG, according to which the works council must co-determine regulations on the prevention of accidents at work and occupational diseases as well as on health protection within the framework of statutory provisions or accident prevention regulations. The LAG Munich denied the works council’s initative right of co-determination on the introduction of a time recording system because employers were legally obliged to do so under Section 3 (2) no. 1 ArbSchG and therefore had no room for manoeuvre. The LAG Munich found that the scope for co-determination related to the design of the time recording system to be used. This scope was directed at the way in which working time was to be recorded, whereby decisions had to be taken on the question of electronic or analogue time recording, whether time recording should be carried out separately according to employment groups, if necessary, and which software was to be used. Pursuant to Section 87 (1) no. 7 BetrVG in conjunction with Section 3 (2) ArbSchG, the works council had the right to decide on this. The employer's objection that a uniform system of time recording had already been decided throughout the group was not an obstacle to the right of initiative, because the unilateral determination was not possible without prior co-determination. A decision on an electronic recording system which had not been agreed with the works council did not fulfil the purpose of the right of co-determination under Section 87 (1) no. 7 BetrVG, according to which the existing leeway was to be implemented as efficiently as possible in the interests of the employees and their health protection. In this context, the employer could also not refer to any future activities of the legislator, since the legal status quo at the time of the court decision was decisive for the legal assessment of the right of initiative.

Finally, with regard to the competence of the conciliation body, a distinction had to be made between the introduction of software, which was covered by the right of co-determination under Section 87 (1) no. 6 BetrVG, and the question of health protection (Section 87 (1) no. 7 BetrVG). In this respect, the same works council body is not necessarily responsible for all questions arising in connection with time recording; rather, questions of health protection are regularly the subject of co-determination of the local works council, as the latter is closer to the matter at hand due to its knowledge of the concrete circumstances.

Consequences for the practice

The decision of the LAG Munich clearly shows the uncertain legal situation that employers are exposed to with regard to the legal update of the legal framework conditions for the recording of working time, which was announced by the legislator shortly after the decision of the BAG of 13 September 2022 and has not yet been implemented. It remains to be seen whether the BAG will adopt the legal position of the LAG Munich when the opportunity arises - in the present decision proceedings it did not have the opportunity to do so, as the employer withdrew the appeal initially filed against the decision of the LAG Munich. In this respect, employers will tend not to be able to protect themselves until the introduction of the statutory regulation on the recording of working time, which is currently available as a draft bill, if the works council initiates regulations on the organisation of the recording of working time, even if the introduction of the statutory obligation to record working time may render already negotiated works agreements with the works council invalid. In view of the expected legal regulations, however, care should be taken when drafting the works agreements that short notice periods are agreed upon and that a possible after-effect - within the scope of the possibilities under works constitution law in accordance with Section 77 BetrVG - is excluded.